https://www.theglobeandmail.com/opinion/editorials/article-when-it-comes-food-price-inflation-in-canada-grocery-stores-arent-the/
opinion
When it comes food price inflation in Canada, grocery stores aren’t the only issue
The Editorial Board
Last month, the news of Canada’s affordability crisis having finally reached its ears, the Trudeau government summoned the chief executive officers of the country’s big grocery chains to Ottawa and gave them until Thanksgiving to come up with a plan to stabilize food price inflation.
Prime Minister Justin Trudeau went so far as to threaten the chains with punitive taxes if they didn’t meet the deadline – a display of populist politics criticized by this space.
And so, with Thanksgiving around the corner, Industry Minister François-Philippe Champagne announced on Thursday that the government had secured “initial commitments†from the grocers that it hopes, but doesn’t guarantee, will result in “aggressive discounts†and price freezes.
The Liberals are not the only politicians to pose as defiant watchdogs of the grocery industry. NDP Leader Jagmeet Singh loudly accuses the chains of “greedflation,†in spite of evidence to the contrary.
But while high corporate concentration in grocery retail bears government scrutiny, the current focus on it overlooks a more complex truth – that there is high corporate concentration in almost every part of Canada’s agri-food economy.
One measure of that, called a concentration ratio, describes the percentage of a given market controlled by four companies. A CR-4 rating over 40 per cent is considered concentrated and risks being anti-competitive. By that measure, Canada’s agri-food sector, from seed to grocery shelf, is heavily weighted against consumers.
Two companies control 99 per cent of Canada’s federally inspected beef slaughter capacity, according to a March, 2023, brief from the National Farmers Union. The same brief said four companies control 95 per cent of the ammonia fertilizer business and 100 per cent of the urea fertilizer business, and that the CR-4 rating for pork processing is 71 per cent.
A continuing tally of agri-food concentration by York University says the CR-4 rating for farm machinery is 45 per cent; for veterinary drugs, it’s 58 per cent. Three companies control 58 per cent of seed sales. Two companies, Weston Bakeries and Canada Bread, control 80 per cent of the bread-making market.
The cherry on the top of this rich confection of concentration, of course, is Canada’s arcane supply management system, which fixes the price of dairy products, eggs and poultry, while also imposing high import tariffs on those goods and setting quotas on domestic production.
In the most recent abuse of that system, the Canadian Dairy Commission raised the price that dairy farmers get for their milk by an unprecedented 8.4 per cent on Feb. 1, 2022 – mid-pandemic – and also jacked the price of butter by 12.4 per cent. The annual Food Price Report published jointly by four Canadian universities found that consumer dairy prices rose 9.7 per cent between September, 2021, and September, 2022 – well above the 6.8-per-cent inflation rate in 2022.
Canada’s contorted agri-food economy often hurt farmers as much as consumers. In just one example, the National Farmers Union says the concentration of beef slaughtering capacity has left breeders with fewer buyers, resulting in lower prices for their cattle. Smaller, regional abattoirs have disappeared, according to a 2021 report by the Senate standing committee on agriculture and agri-food, because federal regulations governing slaughterhouses are too onerous to allow them to compete with big companies.
This is not to overlook the very real problems in the grocery business. Loblaw, Sobeys, Metro, Walmart and Costco control 80 per cent of the market, giving them immense power to limit competition, demand steep supplier discounts and charge high fees just for putting goods on their shelves.
Still, the causes of rising food prices in Canada clearly go beyond the dominance of the five grocery chains. And yet there are no federal politicians in any party willing to tackle an endemic level of corporate concentration that critics argue is stifling competition, curbing innovation, and raising costs for farmers and consumers.
Nor will any of them ever mount a serious challenge to a supply management system that, among its other unintended consequences, has concentrated 74 per cent of the nation’s dairy production in the vote-rich provinces of Ontario and Quebec.
It’s much easier for politicians, the Prime Minister included, to talk tough about talking tough to grocery CEOs, threaten misguided repercussions and set meaningless deadlines.
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opinion
When it comes food price inflation in Canada, grocery stores aren’t the only issue
The Editorial Board
Last month, the news of Canada’s affordability crisis having finally reached its ears, the Trudeau government summoned the chief executive officers of the country’s big grocery chains to Ottawa and gave them until Thanksgiving to come up with a plan to stabilize food price inflation.
Prime Minister Justin Trudeau went so far as to threaten the chains with punitive taxes if they didn’t meet the deadline – a display of populist politics criticized by this space.
And so, with Thanksgiving around the corner, Industry Minister François-Philippe Champagne announced on Thursday that the government had secured “initial commitments†from the grocers that it hopes, but doesn’t guarantee, will result in “aggressive discounts†and price freezes.
The Liberals are not the only politicians to pose as defiant watchdogs of the grocery industry. NDP Leader Jagmeet Singh loudly accuses the chains of “greedflation,†in spite of evidence to the contrary.
But while high corporate concentration in grocery retail bears government scrutiny, the current focus on it overlooks a more complex truth – that there is high corporate concentration in almost every part of Canada’s agri-food economy.
One measure of that, called a concentration ratio, describes the percentage of a given market controlled by four companies. A CR-4 rating over 40 per cent is considered concentrated and risks being anti-competitive. By that measure, Canada’s agri-food sector, from seed to grocery shelf, is heavily weighted against consumers.
Two companies control 99 per cent of Canada’s federally inspected beef slaughter capacity, according to a March, 2023, brief from the National Farmers Union. The same brief said four companies control 95 per cent of the ammonia fertilizer business and 100 per cent of the urea fertilizer business, and that the CR-4 rating for pork processing is 71 per cent.
A continuing tally of agri-food concentration by York University says the CR-4 rating for farm machinery is 45 per cent; for veterinary drugs, it’s 58 per cent. Three companies control 58 per cent of seed sales. Two companies, Weston Bakeries and Canada Bread, control 80 per cent of the bread-making market.
The cherry on the top of this rich confection of concentration, of course, is Canada’s arcane supply management system, which fixes the price of dairy products, eggs and poultry, while also imposing high import tariffs on those goods and setting quotas on domestic production.
In the most recent abuse of that system, the Canadian Dairy Commission raised the price that dairy farmers get for their milk by an unprecedented 8.4 per cent on Feb. 1, 2022 – mid-pandemic – and also jacked the price of butter by 12.4 per cent. The annual Food Price Report published jointly by four Canadian universities found that consumer dairy prices rose 9.7 per cent between September, 2021, and September, 2022 – well above the 6.8-per-cent inflation rate in 2022.
Canada’s contorted agri-food economy often hurt farmers as much as consumers. In just one example, the National Farmers Union says the concentration of beef slaughtering capacity has left breeders with fewer buyers, resulting in lower prices for their cattle. Smaller, regional abattoirs have disappeared, according to a 2021 report by the Senate standing committee on agriculture and agri-food, because federal regulations governing slaughterhouses are too onerous to allow them to compete with big companies.
This is not to overlook the very real problems in the grocery business. Loblaw, Sobeys, Metro, Walmart and Costco control 80 per cent of the market, giving them immense power to limit competition, demand steep supplier discounts and charge high fees just for putting goods on their shelves.
Still, the causes of rising food prices in Canada clearly go beyond the dominance of the five grocery chains. And yet there are no federal politicians in any party willing to tackle an endemic level of corporate concentration that critics argue is stifling competition, curbing innovation, and raising costs for farmers and consumers.
Nor will any of them ever mount a serious challenge to a supply management system that, among its other unintended consequences, has concentrated 74 per cent of the nation’s dairy production in the vote-rich provinces of Ontario and Quebec.
It’s much easier for politicians, the Prime Minister included, to talk tough about talking tough to grocery CEOs, threaten misguided repercussions and set meaningless deadlines.
Sign up for the Amplify Newsletter
Be inspired and challenged by the voices, opinions and insights of women at The Globe and Mail.
Follow us on Twitter: @globedebate
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